BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   SB 885|
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                              UNFINISHED BUSINESS


          Bill No:  SB 885
          Author:   Corbett (D), et al
          Amended:  8/18/10
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  3-2, 3/23/10
          AYES:  Corbett, Hancock, Leno
          NOES:  Harman, Walters

           SENATE FLOOR  :  21-12, 6/3/10
          AYES: Aanestad, Alquist, Cedillo, Corbett, DeSaulnier,  
            Ducheny, Florez, Hancock, Kehoe, Leno, Liu, Lowenthal,  
            Oropeza, Pavley, Price, Romero, Simitian, Steinberg,  
            Wiggins, Wolk, Yee
          NOES: Ashburn, Calderon, Cogdill, Denham, Dutton, Huff,  
            Negrete McLeod, Runner, Strickland, Walters, Wright,  
            Wyland
          NO VOTE RECORDED: Correa, Cox, Harman, Hollingsworth,  
            Padilla, Vacancy, Vacancy

           ASSEMBLY FLOOR  :  50-26, 8/23/10 - See last page for vote


           SUBJECT  :    Gift cards:  dormancy fees:  redemption

           SOURCE  :     Author


           DIGEST  :    This bill deletes exemptions to applying  
          dormancy fees on gift certificates, thus prohibiting them,  
          as specified. 

                                                           CONTINUED





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           Assembly Amendments  delete the Senate version provision  
          requiring a retailer of gift certificates to disclose that  
          a gift certificate with a value of less than $10 may be  
          redeemed for cash, for its cash value.

           ANALYSIS  :    Existing law:

          1. Makes it unlawful to sell a gift certificate that  
             contains an expiration date or a service fee, including,  
             but not limited to, a service fee for dormancy. 

          2. Requires any gift certificate sold after January 1,  
             1997, to be redeemable in cash for its cash value, or  
             replaceable with a new gift certificate at no cost to  
             the purchaser or holder. 

          3. Requires any gift certificate with a cash value of less  
             than $10 to be redeemable in cash for its cash value. 

          4. Exempts from the requirements above, the following gift  
             certificates issued on or after January 1, 1998, with  
             the expiration date appearing in capital letters in at  
             least 10-point font on the front of the gift  
             certificate: 

             A.   Those distributed by the issuer to a consumer  
               pursuant to an awards, loyalty, or promotional program  
               for free; 

             B.   Those donated or sold below face value at a volume  
               discount to employers or to nonprofit and charitable  
               organizations for fundraising purposes if the  
               expiration date on those gift certificates is less  
               than 30 days after the date of sale; and, 

             C.   Gift certificates that are issued for perishable  
               food products. 

          5. Exempts dormancy fee requirements for the following gift  
             cards when: 

             A.   The remaining value of the gift card is $5 or less  
               each time the fee is assessed; 








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             B.   The fee does not exceed $1 per month; 

             C.   There has been no activity on the gift card for 24  
               consecutive months, including, but not limited to,  
               purchases, adding value, or balance inquiries; 

             D.   The holder may reload or add value to the gift  
               card; and, 

             E.   A statement is printed on the gift card in at least  
               10-point font stating the amount of the fee, the  
               frequency of the fee, that the fee is triggered by  
               inactivity of the gift card, and when the fee will be  
               charged. The statement may appear on the front or back  
               of the gift card, but shall appear in a location where  
               it is visible to any purchaser prior to purchase. 

          This bill deletes exemptions to applying dormancy fees on  
          gift certificates, thus prohibiting them, as specified. 

           Prior Legislation
           
          SB 250 (Corbett), Chapter 640, Statutes of 2007

           Background
           
          Over the last several years, gift cards have become  
          increasingly popular as a means of gift-giving.  According  
          to TowerGroup, a financial consulting firm, Americans spent  
          $88.4 billion on gift cards in 2008, but left $6.4 billion  
          unspent and more than $100 million in gift card value was  
          "compromised" in bankruptcies and liquidations.  Also  
          according to TowerGroup, in 2009, Americans spent $87  
          billion on gift cards, an estimated $5 billion of which  
          will go unredeemed.  It is also reported that, in the U.S.,  
          40 percent of recipients do not use the full value of their  
          gift cards.  Often the unredeemed amounts go back to the  
          retailers as revenue.  This is a staggering amount of money  
          for consumers to lose. 

          Because of the concerns outlined above, Senator Corbett  
          authored SB 250.  SB 250 allowed any gift certificate with  
          a cash value of less than $10 to be redeemed in cash for  
          its cash value.  The bill exempted donated gift  







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          certificates and gift certificates for perishable food  
          products from existing law's restrictions on expiration  
          dates and service fees.  SB 885 is intended to build upon  
          and strengthen SB 250 by giving California consumers the  
          full value of their gift cards by allowing them to redeem  
          for cash gift cards with a cash value of less than $20.   
          Additionally, the bill would delete the dormancy fee  
          provisions, which would also ensure that consumers receive  
          the full value of their gift cards. 

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  5/28/10)

          California Labor Federation
          California Public Interest Research Group
          Congress of California Seniors
          Consumer Action
          Consumer Attorneys of California
          Consumer Federation of California
          Consumers Union


           ARGUMENTS IN SUPPORT  :    According to the author's office:

               In these difficult economic times, consumers should  
               have the right to ready access to liquid assets,  
               including the cash value of their gift cards.  The  
               remainder on their unused gift cards could make the  
               difference in paying bills and making ends meet.

               This problem is so common that around $5 billion in  
               gift cards goes unspent every year.  After a few years  
               the retailer gets to claim the consumer's money as  
               profit without supplying a product or paying sales  
               tax.  Companies have claimed as much as $43 million in  
               profit from unspent gift cards in one year.

               While consumers gained new rights under SB 250  
               (Corbett, Ch. 640, Stats. 2007), many retailers are  
               refusing to comply with the law.  Starbucks was taken  
               to court in three counties by the District Attorney  
               and agreed to pay $225,000 in civil penalties for not  







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               complying with the law.  


           ASSEMBLY FLOOR  :  
          AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,  
            Bradford, Brownley, Buchanan, Caballero, Charles  
            Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De  
            Leon, Eng, Evans, Feuer, Fong, Fuentes, Galgiani, Gatto,  
            Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Lieu,  
            Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, V. Manuel  
            Perez, Portantino, Ruskin, Salas, Saldana, Skinner,  
            Solorio, Audra Strickland, Swanson, Torlakson, Torres,  
            Torrico, Yamada, John A. Perez
          NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,  
            Conway, Cook, DeVore, Fletcher, Fuller, Gaines, Garrick,  
            Gilmore, Hagman, Harkey, Jeffries, Knight, Logue, Miller,  
            Nestande, Niello, Nielsen, Norby, Silva, Smyth, Tran,  
            Villines
          NO VOTE RECORDED: Furutani, Hall, Vacancy, Vacancy


          RJG:nl  8/24/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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